Is My Fund a Closet Indexer?
R-squared can measure an investment's correlation with an index, but there are limits.
Answer: As Esther Pak explored in a series on fund performance statistics this past spring, the "Ratings and Risk" tab for mutual funds is a treasure trove of useful risk/reward statistics for mutual funds. One of these statistics is R-squared, which can be helpful on a couple of fronts.
Christine Benz has a position in the following securities mentioned above: SLADX. Find out about Morningstar’s editorial policies.